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Investment Trusts as a portfolio diversification strategy

07/05/2015

First developed in the nineteenth century, an investment trust is incorporated as a public company and listed on the London Stock Exchange. A type of collective or pooled investment fund, an investment trusts is a professionally managed fund which combines the money of a broad range of investors in a single investment vehicle. This pools costs and allows access to a wider range of investments than investors would generally be able to achieve individually. In short, investment trusts offer the advantage of a professional fund manager’s expertise and resources to help you achieve diversified access to the stockmarkets. But the diversification benefits of investment trusts don’t stop there.

“In addition to helping investors avoid the specific risks of investing in a single security, investment trusts also have the ability to invest in alternative asset classes, such as commercial property. For investors that have traditionally favoured stocks, bonds and cash, but in the low interest rate environment are seeking to diversify the asset mix within their portfolio, investment trusts could prove to be an interesting addition,” says Robin Stoakley, Head of UK Intermediary at Schroders

Investment trusts can also help you to achieve sector and geographical diversification, since each fund will have specific investment objectives that relate to a particular strategy, country, region, or industry. For example, while some investment trusts are global, others focus on specific regions such as the UK and Asia. According to Robin Stoakley, Head of UK Intermediary at Schroders, “one advantage that investment trusts offer is that they can be specialist, giving investors exposure to a particular asset or sector that they find difficult to access elsewhere, or too risky to invest in directly.” Of course, each sector and region carries its own investment risks and it’s important that investors consider these before investing.

Determining which fund is best suited to your needs will depend on the current composition of your portfolio, the level of risk you are prepared to take, as well as your investment objectives, goals and time horizon. So, if you are thinking about using investment trusts as part of a diversification strategy, speak to your financial adviser. If you do not currently have a Financial Adviser, you can find one near you by visiting www.unbiased.co.uk.

Please remember that the value of investments and the income from them may go down as well as up and you may not get back the amounts originally invested.

Schroders launched its first investment trust in 1924 and our range provides investors with access to a range of nine distinctive investment opportunities including: UK and Japanese equities, Pan-Asian equities and property.

Important InformationThis article is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Schroders has expressed its own views and opinions in this document and these may change. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.

Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall.

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This communication is marketing material. The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.

This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy.

The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.

Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall.

Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors.

Investors are increasingly turning to real estate to gain exposure to real assets that produce an attractive income return as well as the potential for capital growth. The new Schroder European Real Estate Investment Trust offers investors access to the dynamic continental European real estate markets, as well as the extensive experience of a dedicated investment team based in the target markets, led by Tony Smedley at Schroder Real Estate Investment Management (REIM).